Record commitment to the world’s poverty reduction efforts

Wednesday, 2019-12-18 15:12:20
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The regions, such as the Sahel, the Lake Chad, and the Horn of Africa, will benefit more from the new funding. (Photo: FAO)
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NDO – World Bank Group President David Malpass recently announced that an important WB fund for the poverty-stricken has received a record pledge of US$82 billion, including contributions from countries and many promises affirmed for the next three years.

With such a record commitment, many countries are waiting for opportunities to reduce poverty. However, in the context of the world at risk of being derailed from the roadmap towards the goal of eliminating poverty by 2030, this “war without gunfire” is predicted to remain extremely arduous.

The new financing for the International Development Association (IDA), the WB’s fund for the poorest, increased by US$7 billion compared to three years ago. This is the “largest supplement” to the IDA thus far and is a strong sign of WB development partners’ support for the urgent mission to end extreme poverty and promote shared prosperity in the poorest and most vulnerable countries. The WB leader said the funding will help countries deal with the challenges posed by climate change, gender inequality, and situations of fragility, conflict, and violence, including in the Sahel, the Lake Chad region, and the Horn of Africa. Established in 1960, the IDA has long relied on contributions from rich countries, but since 2017, the fund has issued bonds for investors to replenish its resources. The new funding consists of the contributions from 52 governments and proceeds from financial markets. Africa accounts for a majority of the 74 nations benefitting from the latest replenishment package, with US$53 billion.

The world picture of poverty has seen many transformations into brighter colours. A UN report on the sustainable development goals (SDGs) for 2019 shows that the proportion of people in extreme poverty (earning less than US$1.9 per day) in the world has fallen sharply, from 35.9% in 1990 to 9.9% in 2015. Over the past 25 years, more than one billion people throughout the globe have risen to escape out of the extreme poverty threshold. Most of these people are from East Asian countries, where the poverty rate fell from 52% in 1990 to below just 1% in 2015. South Asia has also achieved an admirable goal concerning the escape of extreme poverty. However, that is only the bright side of this multicoloured picture. In fact, projections show that by 2030, the global extreme poverty rate will only decline to 6% if the current momentum continues. As many as 413 million of the 736 million extremely poor people in the world are living in southern Sahara (Africa). Worrisomely, the number of people in this group is tending to increase. In the face of a poverty reduction slowdown in many countries, the UN warns that if nations do not make significant policy adjustments, the extreme poverty rate in southern Sahara will increase to a double-digit level by 2030.

The desire for a world without poverty is still far away, as the number of people left with food shortages continues to surge, from 811 million in 2017 to 821 million in 2018. The United Nations Food and Agriculture Organisation (FAO) forecasts that the world will not be able to reach the goal of hunger elimination by 2030. This is considered a bad trend, because there cannot not be peace and stability if food security is not ensured. According to economic experts, trade will remain the most important area to help many countries escape poverty provided that policy makers strengthen their participation in the global value chain. The advantage of underdeveloped countries is that they can join the chain with only one component without having to possess advanced technology or skills to produce finished products. As a result, these countries will be able to increase their output and spur their economic growth.

In order to exploit the global value chain, the WB is urging countries to focus on reforms. In addition, many recommendations have been made by economists to reverse the trend of increasing poverty, which is also one of the important goals on sustainable development set by the UN. However, it is warned that the world will deviate from its goal of poverty eradication if nations do not take drastic action. Capital resources will only add up debts if they are not well managed. The commitments of rich countries will only be effective when there is sound cooperation between investors and beneficiary countries.